European finance ministers encountered a range of hurdles to financing Greece through the next few weeks during negotiations over another full-scale bailout.
All the available options are either financially inadequate, politically unpalatable, legally suspect or beyond European leaders’ control, finance ministers said.
With Greece due to pay the European Central Bank 3.5 billion euros ($3.9 billion) on Monday, ministers are looking at whether they could recycle interest payments already made by Greece to euro-zone central banks, tap a fund managed by all 28 European Union governments, give Greece more time to pay, or organize bilateral loans from individual EU governments.
“We are looking at all the instruments and funds that we could use and all of them seem to have disadvantages or impossibilities or legal objections,” Dutch Finance Minister Jeroen Dijsselbloem, chairman of the group of euro ministers, told reporters on Tuesday in Brussels.
Beyond the July 20 ECB deadline, Greece has to make 600 million euros of interest payments in August and also owes $1.7 billion in arrears to the International Monetary Fund. Maltese Finance Minister Edward Scicluna put overall bridge financing needs at about 7 billion euros.
European leaders promised this week to offer a funding package that would bridge the time it takes to negotiate a third Greek bailout, worth as much as 86 billion euros. Euro-area ministers will discuss Greece’s short-term financing on a conference call later Tuesday or Wednesday.
“Never underestimate the capacity of European lawyers and economists to come up with a solution,” Finnish Finance Minister Alexander Stubb said. “It would be impossible to back down at this stage.”
Funding tools available include the 13.2 billion-euro European Financial Stabilization Mechanism; the possibility of tapping the Securities Market Program, which consists of profit-sharing pledges from member nations’ central banks, bilateral loans from countries and increasing Greece’s T-bill ceiling, according to an EU official.
No single option will be enough, Austrian Finance Minister Hans Joerg Schelling said. He told reporters in Vienna on Tuesday that “a mix of different alternatives” will be found.
Use of the EFSM has already run into objections because it would require the nine countries outside the euro to share the burden. Finance chiefs from Britain, Denmark and the Czech Republic were among euro outsiders to protest.
“Concerns were raised by several non-euro-area member states, and this is something we need to take into account,” said Valdis Dombrovskis, European Commission vice president for euro policy.
Britain extricated itself from euro-area bailouts in December 2010, and an attempt to draw it back in could inflame anti-European opinion in the runup to the referendum it will hold by 2017 on whether to leave the EU. While the U.K. would likely struggle to muster enough votes to block the use of the EFSM, the euro nations may blanch at the political costs of forcing a payment through against British wishes.
“The idea that British taxpayers are going to be on the line for this Greek deal is a complete non-starter,” U.K. Chancellor of the Exchequer George Osborne said. “The euro zone needs to foot its own bill.”